Selling a house? Now you have to prove to the ATO that you’re actually an Aussie…
So this has got me rolling my eyes like a pokie machine.
The ATO has gone and lobbed a grenade into the property market, right out of left-field.
You might have seen it already. It’s causing a bit of a stir.
Under the new regime, if you purchase a property worth $2m or more on or after July 1 2016, you will be required to withhold 10 per cent of the purchase price and remit it to the ATO UNLESS the vendor is able to provide a special purpose tax resident’s “clearance certificate” from the ATO.
Yep, unless the seller can prove to you that they’re an Aussie, you have to give 10% of the purchase price to the ATO.
At first I’m thinking, oh yeah, no worries. I’ll just smash a stubbie of VB in a single slug and belt out a few bars of Khe Sanh.
(Just another Saturday at auction.)
But no it’s not as simple as that. I’ve got to go to the ATO and get a 6-page ‘Foreign resident capital gains withholding clearance certificate application’ form.
I’m not shitting you.
That certificate is then only valid for 12 months (in case my country of birth changes in the interim.)
Effectively, the ATO are saying that the starting point is that everyone selling a property in Australia is a foreigner, unless they can prove otherwise.
Now think about how many properties are sold in Australia in any given year. How many of them are actually owned by foreigners? My guess would be zero point stuff-all.
Of course we are talking properties worth more than $2m. That used to mean high-end properties, but not any more. We’re now talking middle of the road up.
My point is that in order to catch a small number of illegal foreign purchases, by picking them up at the back door at the point of sale, we all now have to jump through this ridiculous hoop.
The worst of it is that it looks like the ATO has used a legitimate public concern about illegal foreign purchases to expand its data collection and policing.
True, this will make sure that foreigners meet their capital gains tax obligations and that’s a good thing.
But say you’re a bit behind on your tax return. Or if you run your own business, or use a company to run your property investment business, say you’re a bit late on your BAS.
Does the ATO have the ability to hold out on you? Can they say, No Jon, you’ve still got $12 outstanding from your last BAS. Pay it up like a good boy and then we’ll give you your clearance.
The ATO will also be able to compare asset-ownership with declared earnings – so if you’ve been earning minimum wage but are asking for clearance on a $5m beachfront complex, it can raise some flags.
And they get to run this check on you every 12 months if you’re a serious investor who sells properties regularly.
Now I’ve got no problem with any of that in principal. We should all be playing by the rules. But it does worry me that property is being used as the Trojan horse to slip these extra powers through.
Because there’s already a prejudice against property built into the system. You don’t have to pay stamp-duty on shares, or land tax. And my bet is that it’s a heck of a lot easier to dodge tax through the share market and off-shore entities than it is through property.
So claims that we’re gunning for the ‘high-end’ sound like BS to me.
When I look into my crystal ball, I see the $2m figure holding steady, even as the median house price in Sydney eclipses the $2m mark sometime around 2020.
I also see a point where we actually do find ourselves in a budget black hole, and the government drops the threshold to $1m, or even all together to increase the tax take. I also see the ATO introducing “processing” fee.
(I also see Carlton having a blinder of a year in 2017, by the way.)
And so the real targets here are not foreigners, it’s not even ‘wealthy’ people. It’s ordinary Australians.
It’s aimed at people without enough wealth to set up complex trust structures, and get funny with the stock market. It’s aimed at people whose primary store of wealth is their home.
The tax system is skewed against the poor. The more money you have, the more opportunities you have to game the system and get away with paying next to nothing.
If you work a 9-5 job, you’ve got nothing. The tax-man takes your money before you even see it.
And pretty soon, you can expect a tax-audit every time you want to sell the family home or off-load an investment property.
You get shafted every which way.
All in the name of managing the problem of foreign buyers – a problem which seems to be sorting itself out anyway, and was probably better dealt with through the state governments stamp duty register, or local councils rate collections, IMHO.
I don’t like where this is coming form and where it’s going. Maybe things in Canberra are leaner than we thought.
And on top of that, it’s shaping to be a real pain in the arse.
Add negative gearing changes to this, and extra taxes on foreign purchases, and it’s shaping to be a hell of a year for property.
Lay off the golden goose, you turkeys.
Is this going to affect you? What are you going to do?